A rally beyond ₹340 is less likely
While the major trend in zinc is bullish, there has been a considerable weakness seen in the base metal price movements, keeping the short-term trend bearish. The continuous contract of zinc on the MCX (Multi Commodity Exchange) has been on a downtrend since mid-April. The price of the contract fell from about ₹380 to mark a three-month low of ₹301 on May 13.
But on getting support at f ₹300, the contract rebounded and is currently trading around ₹330. Notably, it made a fresh five-week high of ₹339.8 last week before softening to the current level. Nevertheless, over the past week, the contract has been oscillating between ₹330 and ₹338.
The possibility of the contract moving past ₹340 is very low and anticipate the zinc futures to resume its downtrend anytime soon. It can drop to ₹322 initially, where the 50-day moving average lies. It is expected to decline to the support band of ₹286-292 in two months.
Traders can short zinc futures on the MCX at the current level of ₹330 with stop-loss at ₹345. When price drops below ₹322, revise the stop-loss to ₹338. When it touches ₹300, liquidate half of the total shorts on hold and tighten the stop-loss to ₹315. Book the remaining shorts when the price falls to ₹292 as there could be a bounce off at the support band of ₹286-292.